Council finance crackdown: necessary oversight or naked power grab?
Election-year hiring, leasing and projects will require government approval.
Artwork: Dosain
07 Aug, 5:28 PM
This article was produced with the support of Strengthening Peace & Democracy through Internews Europe, as part of the Advancing Political Pluralism and Transparency (APPT) project funded by the European Union.
Councils across the country are in revolt as parliament rammed through a bill that bans collecting rent on public service properties, restricts the ability to run businesses and requires approval for hiring staff, leasing land and starting development projects in their final year in office.
Councils across the country are in revolt as parliament rammed through a bill that bans collecting rent on public service properties, restricts the ability to run businesses and requires approval for hiring staff, leasing land and starting development projects in their final year in office.
In a fast-tracked process with just 19 hours' notice for public feedback, the ruling party's supermajority voted through the amendments to the decentralisation law on Wednesday.
The opposition Maldivian Democratic Party denounced the changes as deliberately paralysing local governance by curtailing financial autonomy. But the ruling People's National Congress defended tighter government control over council finances as necessary to exercise oversight and ensure accountability.
What do the amendments say?
The five key changes:
1-
Councils can only operate businesses through Local Authority Companies if the ventures are essential for island development, have a minimum investment of MVR 10 million (US$ 648,500), and do not compete with services already provided by private businesses. Existing businesses that don’t meet these requirements must shut down within 90 days.
2-
Councils are prohibited from collecting rent from land or buildings leased for public services.
3-
The finance ministry can deduct outstanding utility payments of more than six months from the annual block grants allocated for councils from the state budget.
4-
Councils must manage their bank accounts according to finance ministry guidelines and submit statements whenever requested.
5-
In the final year of a council's term, councils must seek approval from the Local Government Authority and Finance Ministry before hiring permanent or contract staff, leasing land, lagoons or reefs, or starting new development projects not already in their official development plan.
What did ruling party lawmakers say?
The changes are meant to stop outgoing councillors from making major decisions, Majority Leader Ibrahim Falah declared, denying that the aim was to weaken councils ahead of the council elections in April 2026.
“The main thing in this amendment is that councils should not lease land in the island or hire contract staff in the final year of their term in order to win re‑election. This amendment was necessary because these kinds of things are going on,” he said. The reforms would create “an opportunity for the next council to do good work," he added.
The revisions clearly define the scope of council-run companies, prevent misuse of public resources, and create a fairer system for releasing block grants, while reducing risks of corruption and politically-motivated spending before elections, said Fuvahmulah South MP Ibrahim Hussain.
Earlier this week, Malé Mayor Adam Azim was accused of tailoring a 25‑year land lease for a public toilet project without consultation or approval from other councillors. The city council on Wednesday voted to cancel and restart the process.
Tensions have also grown between councils and state-owned companies, including disputes with the Bank of Maldives over rent for ATM spaces.
Ruling party lawmakers also voiced scepticism about council's spending on overseas trips. The deputy speaker has been particularly vocal about the block grant allocations and excessive expenditure as the government grapples with a looming debt crisis.
What does the opposition say?
The main opposition MDP characterised the amendments a rollback of 2019 reforms that gave councils financial and administrative autonomy, warning that they would strip councils of the ability to generate revenue and deliver services.
During a press conference on Tuesday, MDP members accused the government of trying to gain an electoral advantage and criticised how the changes were rushed through with minimal public consultation. Councils are already accountable, receiving only five percent of the state budget, they argued, and the new restrictions would unfairly weaken island communities while leaving spending by ministries and state‑owned companies unchecked.
What about councils?
As the MDP called on councils to “stand up” against the bill, a wave of councils put out press statements condemning the restrictions on their powers.
The purpose of the bill was to “take back the financial autonomy to the central government and create a system that would force the atolls to beg at the feet of ministers,” Vaavu Atoll Council President Shuja Ali said, warning that it would weaken the decentralisation system and reduce council’s autonomy.
And civil society?
Anti-corruption NGO Transparency Maldives said the amendments would limit the role of councils by taking away their administrative powers, threatening their autonomy and imposing barriers to the provision of essential public services and development initiatives.
The limitations on Local Authorities Companies would “disproportionately affect smaller councils”, TM warned, noting that prohibiting rent collection from land leased for public services would limit options for generating revenue.
The changes impact the financial autonomy of councils and its ability to shape development projects in their own communities creating a reliance on the central government, TM said.
TM acknowledged the need to strengthen legal framework to prevent abuse of state resources, noting that development projects, job offers and other economic opportunities have been used to influence voters during election cycles. However, any restrictions must apply uniformly to both local and central government, TM said.
Hasn't the decentralisation law been changed before?
Many times. Alongside new urban planning laws, this was the sixth revision to the 2010 Decentralisation Act since President Dr Mohamed Muizzu took office.
The 2008 constitution – which was adopted 17 years ago today – mandated decentralised administration and the replacement of the centuries-old appointed island and atoll chief posts with elected representatives.
The first municipal elections were held in February 2011. Ahead of the third elections in May 2017, parliament revised the law to reduce the number of councillors to 653 from more than 1,000.
The landmark reforms made by the MDP government in 2019 raised the number of councillors to 980. A constitutional amendment passed during the Covid-19 lockdown in mid-2020 lengthened the term from three to five years, as the pandemic delayed the 2020 elections to April 2021.
The Act was amended again in 2020 and 2022.
Meanwhile, parliament's decentralisation committee is discussing a resolution to review the decentralisation system and all the amendments made in the past 15 years. Discussions have focused on potentially reducing the number of councillors on islands with small populations.
This article was produced with the support of Strengthening Peace & Democracy through Internews Europe, as part of the Advancing Political Pluralism and Transparency (APPT) project funded by the European Union.
This article was produced with the support of Strengthening Peace & Democracy through Internews Europe, as part of the Advancing Political Pluralism and Transparency (APPT) project funded by the European Union.
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